Astoria Portfolio Advisors has launched the Astoria US Equal Weight Quality Kings ETF, which invests in 100 of the highest quality U.S. large and mid-cap stocks. The firm asserts that their fund can help mitigate concentration risks associated with market-cap weighting. John Davi, CEO of Astoria Portfolio Advisors, cautions investors about the S&P 500 index's heavy reliance on the so-called Magnificent Seven stocks: Apple, Microsoft, Nvidia, Amazon, Meta Platforms, Alphabet, and Tesla.
Davi argues that the S&P 500's focus on these tech giants could skew a portfolio's diversification goals. Despite the ETF's launch on July 31, 2023, seeing a growth of more than 26%, the S&P 500 has surged by 32% during the same period. FactSet data reveals that as of January 31, the top 10 stocks in the S&P 500, predominantly consisting of big tech, account for approximately 36% of the index. In contrast, each stock within Astoria's ETF is equally weighted at around 1%.
"Those Mag Seven stocks are very expensive right now," – John Davi
The Astoria US Equal Weight Quality Kings ETF aims to provide long-term investors with a more balanced approach. Davi highlights that his ETF's marginal contribution to risk and return surpasses traditional indices.
"Our marginal contribution to risk and return is a lot higher," – John Davi
To further diversify portfolios away from technology-heavy indices, Todd Rosenbluth from VettaFi suggests alternative ETF options beyond Astoria’s offering. American Century has developed an ETF focusing on quality and growth within the S&P 500. Similarly, Invesco offers an S&P 500 quality ETF, SPHQ, which filters for quality within the index.
Davi advises investors to reassess their portfolios and consider rotating into alternatives beyond the Magnificent Seven stocks.
"You should rotate your portfolio, and rotate into other things beside 'Mag Seven' stocks." – John Davi
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